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Discrete Choice with Social Interactions and Endogenous Memberships

Author

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  • Giulio Zanella

Abstract

This paper is about selection of neighbors in models of social interactions. I study a general equilibrium model of behavior subject to endogenous social influences when heterogeneous individuals can choose whom to associate with, buying associations on a "memberships market". Social effects in behavior turn out to be a stratifying force: The desire for valuable interactions induces inefficient sorting and may lead to the endogenous emergence of "social traps" . The theory is then used to suggest identification strategies that may solve, in a microfounded way, identification and selection problems that typically affect empirical work on social interactions. Such strategies offer a viable alternative when valid instrumental variables or randomized experiments are not available. (JEL: C26, D85, Z13, Z19) (c) 2007 by the European Economic Association.

Suggested Citation

  • Giulio Zanella, 2007. "Discrete Choice with Social Interactions and Endogenous Memberships," Journal of the European Economic Association, MIT Press, vol. 5(1), pages 122-153, March.
  • Handle: RePEc:tpr:jeurec:v:5:y:2007:i:1:p:122-153
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    Citations

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    Cited by:

    1. Marini, Annalisa, 2016. "Immigrants, Trust and Social Traps," MPRA Paper 69627, University Library of Munich, Germany, revised Feb 2016.
    2. ÖZGÜR, Onur & BISIN, Alberto, 2011. "Dynamic Linear Economies with Social Interactions," Cahiers de recherche 04-2011, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    3. Gioia De Melo, 2011. "Peer effects identified through social networks. Evidence from Uruguayan schools," Department of Economics University of Siena 627, Department of Economics, University of Siena.
    4. Yannis Ioannides & Giulio Zanella, 2008. "Searching for the Best Neighborhood: Mobility and Social Interactions," Discussion Papers Series, Department of Economics, Tufts University 0720, Department of Economics, Tufts University.
    5. Bicchieri, Cristina & Marini, Annalisa, 2015. "Female Genital Mutilation: Fundamentals, Social Expectations and Change," MPRA Paper 67523, University Library of Munich, Germany.
    6. Marini, Annalisa & Navarra, Pietro, 2016. "Autonomy, Social Interactions and Culture," MPRA Paper 69757, University Library of Munich, Germany.
    7. Ethan Cohen-Cole & Giulio Zanella, 2008. "Welfare Stigma or Information Sharing? Decomposing Social Interactions Effects in Social Benefit Use," Department of Economics University of Siena 531, Department of Economics, University of Siena.
    8. Christian Ghiglino & Sanjeev Goyal, 2010. "Keeping Up with the Neighbors: Social Interaction in a Market Economy," Journal of the European Economic Association, MIT Press, vol. 8(1), pages 90-119, 03.
    9. Jason Fletcher, 2013. "Social Interactions And College Enrollment: Evidence From The National Education Longitudinal Study," Contemporary Economic Policy, Western Economic Association International, vol. 31(4), pages 762-778, October.
    10. Marini, Annalisa, 2016. "Cultural Beliefs, Values and Economics: A Survey," MPRA Paper 69747, University Library of Munich, Germany.
    11. Ethan Cohen-Cole & Burcu Duygan-Bump, 2008. "Household bankruptcy decision: the role of social stigma vs. information sharing," Risk and Policy Analysis Unit Working Paper QAU08-6, Federal Reserve Bank of Boston.

    More about this item

    JEL classification:

    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification
    • Z19 - Other Special Topics - - Cultural Economics - - - Other

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